Allowance Method for Accounting for Bad Debts

At the beginning of 2016, EZ Tech Company's Accounts Receivable balance was $132,000, and the balance in Allowance for Doubtful Accounts was $2,250 (Cr.). EZ Tech's sales in 2016 were $990,000, 70% of which were on credit. Collections on account during the year were $630,000. The company wrote off $4,000 of uncollectible accounts during the year.

Required:

1.Prepare summary journal entry related to the (a) sale during 2016. Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

Prepare summary journal entry related to the (b) collections during 2016.

Prepare summary journal entry related to the (c) write-offs of accounts receivable during 2016.

2a.Prepare the journal entry to recognize bad debts assuming that bad debts expense is 3% of credit sales. Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.

2b.Prepare the journal entry to recognize bad debts assuming that amounts expected to be uncollectible are 7% of the year-end accounts receivable.

3.What is the net realizable value of accounts receivable on December 31, 2016, under each assumption in part (2)?

Using the percentage of sales approach, the net realizable value of the receivables is?

$__________

Using the percentage of year-end receivables approach, the net realizable value of the receivables is?

$_________________